Q3 2024 Liquidity Services Inc Earnings Call

August 8, 2024

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Operator: 3rd Quarter of Fiscal Year 2024 Financial Results Conference Call. My name is Lauren Cannon, and I will be your operator for today's call. Please note that this conference call is being recorded. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I will now turn the call over to Michael Patrick, Liquidity Services Vice President and Controller.

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Lauren Cannon: Welcome to the Liquidity Services Inc. third quarter of fiscal year 2024 financial results conference call. My name is Lauren Cannon and I will be your operator for today's call. Please note that this conference call is being recorded.

Michael Patrick: At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. I will now turn the call over to Michael Patrick, Liquidity Services Vice President and Controller.

Operator: On the call today are Bill Angrick, our Chairman and Chief Executive Officer, and Jorge Celaya, our Executive Vice President and Chief Financial Officer. They will be available for questions after their prepared remarks. The following discussion and responses to your questions reflect management's views as of today, August 8, 2024, and will include forward-looking statements. However, actual results may differ materially.

Speaker Change: Good morning. On the call today are Bill Angrick, our Chairman and Chief Executive Officer, and Jorge Celaya, our Executive Vice President and Chief Financial Officer.

They will be available for questions after their prepared remarks.

Speaker Change: The following discussion and responses to your questions reflect management's views as of today, August 8, 2024, and will include forward-looking statements. Actual results may differ materially.

Operator: Additional information about factors that could potentially impact our financial results is included in today's press release and in filings with the SEC, including our most recent annual report on Form 10-K. As you listen to today's call, please have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter. During this call, management will discuss certain non-GAAP financial measures discussed in our press release and filings with the SEC.

Speaker Change: Additional information about factors that could potentially impact our financial results is included in today's press release and in filings with the SEC, including our most recent annual report on Form 10-K .

Speaker Change: As you listen to today's call, please have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter.

Speaker Change: During this call, management will discuss certain non-GAAP financial measures.

Speaker Change: In our press release and filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP measures, including the reconciliation of these measures with their most comparable GAAP measures, as available.

Speaker Change: management also uses certain supplemental operating data has a measure of certain components of operating performance which we also believe is useful for management and investors

Speaker Change: The supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results.

Operator: Each of which is posted on our website. You will find additional disclosures regarding these non-GAAP measures, including the reconciliation of these measures with their most comparable GAAP measures, as available. Management also uses certain supplemental operating data as a measure of certain components of operating performance, which we also believe is useful for management and investors. The supplemental operating data, including gross merchandise volume, should not be considered a substitute for or superior to GAAP results. At this time, I will turn the presentation over to our Chairman and CEO, Bill Angrick. Good morning, and welcome to our

William Angrick: Good morning and welcome to our Q3 earnings call. I'll review our Q3 performance and the progress of our business segments. The next Jorge Celaya will provide more details on the quarter.

banger: at this time i will turn the presentation over to our chairman and ceo banger good morning and welcome to our q three earnings call

Speaker Change: I'll review our Q3 performance and the progress of our business segments. The next Jorge Celaya will provide more details on the quarter.

William Angrick: We're proud to report record GMV this quarter, $380 million, driven by market share gains, expanded services, and outstanding prior participation. These results provide a strong proof point that we are on track to achieve our near-term goal of $1.5 billion in annual GMV. Additionally, our scalable platform continues to drive profitable growth. And in Q3, we delivered our highest quarterly GAAP net income in fiscal year 2024 and the strongest non-GAAP adjusted EBITDA performance in a decade, our flexible services ranging from self-directed to fully managed offerings and efforts to harness the benefits of AI technologies, are continuing to attract more sellers and buyers, enhancing the size and scale of our marketplace, and Fueling Our Growth. Our GovDeal segment set a quarterly GMB record of $250 million.

Jorge Celaya: we're proud to report record gmv this quarter the three hundred eighty million dollars

Speaker Change: Driven by market share gains.

Jorge Celaya: Expanded Services

Speaker Change: and Outstanding Prior Participation.

Jorge Celaya: These results provide a strong proof point that we are on track to achieve our near-term goal of 1.5 billion dollars in annual GMV.

Speaker Change: Additionally, our scalable platform continues to drive profitable growth.

Speaker Change: and in q three we delivered our highest quarterly gaap net income in fiscal year two thousand and twenty four and strongest non-gaap adjusted ebitda performance in a decade

Speaker Change: flexible services ranging from self-directed to fully managed offerings and efforts to harness the benefits of AI technologies

Speaker Change: are continuing to attract more sellers and buyers, enhancing the size and scale of our marketplace.

Speaker Change: and Fueling Our Growth.

Speaker Change: Our GovDeal segment set a quarterly GMB record of $250 million.

William Angrick: Driven by continued seller acquisition and service expansion. While we have seen evidence of softening prices, Gov deals recorded strong year-over-year growth in vehicle sales and set numerous records, including the number of sellers, the number of asset listings, and the number of vehicle listings during Q3. We continue to expand our market share together with the recently acquired Sierra Auction Business and signed notable new clients during Q3, including the State of New York, Spokane County, Washington, Norman, Oklahoma, and Mesa, Arizona.

Speaker Change: Driven by continued seller acquisition and service expansion.

Lauren Cannon: Welcome to the Liquidity Services Inc. 3rd quarter of fiscal year 2024 Financial Results Conference call. My name is Lauren Cannon and I will be your operator for today's call.

Speaker Change: While we have seen evidence of softening prices.

Speaker Change: Gov deals recorded strong year-over-year growth in vehicle sales and set numerous records, including the number of sellers, number of asset listings, and number of vehicle listings during Q3.

Unknown Executive: Please note that this conference call is being recorded. At this time, all participants are in a listen only mode.

Michael Patrick: Later, we will conduct a question and answer session and will now turn the call over to Michael Patrick, Liquidity Services Vice President and Controller.

Speaker Change: We continue to expand our market share together with the recently acquired Sierra Auction business and signed notable new clients during Q3, including the State of New York,

Michael Patrick: Good morning. On the call today are Bill Angrick, our Chairman and Chief Executive Officer and Jorge Celaya, our Executive Vice President and Chief Financial Officer. They will be available for questions after their prepared remarks. Following discussion and responses to your questions reflect management views as of today, August 8, 2024, and will include forward looking statements. Actual results may differ materially. Additional information about factors that potentially impact our financial results is included in today's press release and in filings with the SEC, including our most recent annual report on form 10K.

Speaker Change: Spokane County, Washington, Norman, Oklahoma, and Mesa, Arizona.

William Angrick: Additionally, in our Bid for Assets Marketplace, which is included in our C.U.B.E. deals segment results, we are now ramping up our Philadelphia contract and have signed several new sheriff contracts in the states of Pennsylvania and Louisiana. Our Retail Supply Chain Group segments' focus on exceptional service delivery to its seller clients has been rewarded with increased volumes, which are poised to accelerate further in the fourth quarter. Additionally, we launched the first phase of our single item receiving tool, which will enhance operational efficiencies for both our B2B and B2C channels.

Speaker Change: Additionally, in our Bid for Assets Marketplace, which is included in our CUB deals segment results, we are now ramping our Philadelphia contract and have signed several new sheriff contracts in the states of Pennsylvania and Louisiana.

Speaker Change: a retaoil supply chain group segments' focus on exceptional service delivery to its seller clients has been rewarded with increased volumes which are poised to accelerate further in the fourth quarter

Michael Patrick: As you listen to today's call, please have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. During this call, management will discuss certain non-gap financial measures. In our press release and filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-gap measures, including the reconciliation of these measures with their most comparable gap measures as available.

Speaker Change: We launched the first phase of our single item receiving tool, which will enhance operational efficiencies for both our B2B and B2C channels.

William Angrick: During Q3, we onboarded several new clients for utilizing our all surplus deals B2C channel, and we expanded our relationship with several long-standing clients. Together, these efforts will result in continued growth in Q4 and beyond in our RSEG segment. Our Machinio segment set another revenue record as it continues to be a leader in matching buyers and sellers of used equipment around the globe. Our market research reveals that customers receive superior value through our Machinio advertising and storefront products versus the competition.

Speaker Change: During Q3, we onboarded several new clients who are utilizing our All Surplus Deals B2C channel, and we expanded our relationship with several long-standing clients.

Speaker Change: together these efforts will result in continued growth

Michael Patrick: Management also uses certain supplemental operating data as a measure of certain components of operating performance, which we also believe is useful for management and investors. The supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to gap results.

Speaker Change: and Q4 and beyond in our RSEG segment.

Speaker Change: Our Machinio segment set another revenue record as it continues to be a leader in matching buyers and sellers of used equipment around the globe.

Speaker Change: Our market research reveals that customers receive superior value through our machinio advertising and storefront products versus the competition.

William Angrick: At this time, I will turn the presentation over to our Chairman and CEO, Bill Angrick. Good morning and welcome to our Q3 earnings call. I'll review our Q3 performance in the progress of our business segments.

William Angrick: We expect to sustain mid-teens or better organic revenue growth going forward as Machinio expands its market share in all geographies in Q4. However, our capital asset group segment grew GMV 7% year over year during Q3, but results were lower than expected due to several delayed or canceled sales outside of our control in the U.S. and Asia region.

Speaker Change: We expect to sustain mid-teens or better organic revenue growth going forward as Machinio expands its market share in all geographies in Q4.

William Angrick: The next Jorge Celaya will provide more details on the quarter. We're proud to report record GMV this quarter with $380 million driven by market share gains, expanded services and outstanding higher participation. These results provide a strong proof point that we are on track to achieve our near-term goal of $1.5 billion in annual GMV. Additionally, our scalable platform continues to drive profitable growth. In Q3, we delivered our highest quarterly gap net income in fiscal year 2024 and strongest non-gap adjusted EBITDA performance in a decade.

Speaker Change: Our capital asset group segment grew GMV 7% year-over-year during Q3, but results were lower than expectation due to several delayed or canceled sales outside of our control in the US and Asia regions.

William Angrick: However, we continue to have good success, signing new clients, and adding over 33 new mandates to our industrial CAG pipeline during Q3. We also set a new record for unique sellers in our CAG heavy equipment fleet vertical during the quarter, which bodes well for continued growth of more predictable recurring revenue in our CAG segment. Finally, we continue to invest in platform improvements, including seller listing tools and asset templates, to drive efficiency and convenience for sellers.

Speaker Change: However, we continue to have

Speaker Change: Good success, signing new clients, adding over 33 new mandates to our industrial CAG pipeline during Q3.

Speaker Change: We also set a new record for unique sellers in our CAG heavy equipment fleet vertical during the quarter, which bodes well for continued growth of more predictable recurring revenue in our CAG segment.

William Angrick: Our flexible services ranging from self-directed to fully managed offerings and efforts to harness the benefits of AI technologies are continuing to attract more sellers and buyers. Enhancing the size and scale of our marketplace, and fueling our growth. Our Goddeal segment set a quarterly GMB record of $250 million. Driven by continued seller acquisition and service expansion. While we have seen evidence of softening prices, Goddeal's recorded strong year-over-year growth in vehicle sales and set numerous records, including the number of sellers, number of asset listings, and number of vehicle listings during Q3.

Speaker Change: finally we continue to invest in platform improvements including seller listing tools and asset templates

William Angrick: We continue to harness the potential of AI applications to improve the quality of asset listings, make enriched data useful for customers, and Enhance Marketplace Search Functionality to Optimally Match available assets with our buyer's purchasing criteria. Together, these enhancements will continue to improve our seller and buyer experience. In summary, we are well positioned strategically and financially in the current environment. Our solutions assist clients to weather the cyclicality of an uncertain macro environment. We have a robust business development pipeline and continue to pursue strategic opportunities in each segment of the circular economy to drive customer and shareholder value. And I'll turn it over to Jorge for more details on the quarter.

Speaker Change: to drive efficiency and convenience for our sellers.

Speaker Change: we continue to harness the potential of ai applications to improve the quality of asset listings

Speaker Change: Enriched data useful for customers.

Speaker Change: and Enhance Marketplace Search Functionality to Optimally Match Available Assets with our Buyer's Purchasing Criteria.

Speaker Change: Together, these enhancements will continue to improve our seller and buyer experience.

Speaker Change: in summary

Speaker Change: we're well positioned strategically and financially in the current environment

William Angrick: We continue to expand our market share together with the recently acquired Sierra Auction business and signed notable new clients during Q3, including the state of New York, Spokane County, Washington, Norman, Oklahoma, and Mesa, Arizona. Additionally, and our bid for assets marketplace, which is included in our cup deals segment results. We are now ramping our Philadelphia contract and have signed several new share of contracts in the states of Pennsylvania and Louisiana. Our retail supply chain group segments focus on exceptional service delivery to its seller clients has been rewarded with increased volumes, which are poised to accelerate further in the fourth quarter.

Speaker Change: Our solutions assist clients to weather the cyclicality of an uncertain macro environment.

Speaker Change: We have a robust business development pipeline and continue to pursue strategic opportunities in each segment of the circular economy to drive customer and shareholder value.

Speaker Change: And I'll turn it over to Jorge for more details on the quarter.

Jorge Celaya: Good morning. Our $380 million in GMB for this fiscal third quarter is a new record and a 14% increase over our previous record of $334 million set in the same quarter last year. GovDeals continues to set records, including for quarterly GMV at $250 million, expanding market share, and new services. Our retail segment remains a trusted long-term business partner with the scale, flexibility, innovation, and reliability, and with broad multi-channel solutions to consistently address the needs of our seller clients.

Speaker Change: Good morning.

Jorge Celaya: Our $380 million in GMB for this fiscal third quarter is a new record and a 14% increase over our previous record of $334 million set in the same quarter last year.

Jorge Celaya: GovDeals continues to set records, including for quarterly GMV at $250 million.

William Angrick: We launched the first phase of our single item receiving tool, which will enhance operational efficiencies for both our B2B and B2C channels. During Q3, we onboarded several new clients for utilizing our all surplus deals B2C channel and we expanded our relationship with several long standing clients. Together, these efforts will result in continued growth in Q4 and beyond in our RSEG segment. Our machinio segment set another revenue record as it continues to be a leader in matching buyers and sellers that use equipment around the globe.

Jorge Celaya: Expanding Market Share and New Services

Speaker Change: Our retail segment remains a trusted long-term business partner with the scale, flexibility, innovation, and reliability, and with broad multi-channel solutions to consistently address the needs of our seller clients.

Speaker Change: The capital assets segment remains a global presence for corporate clients to monetize their fixed assets across economic and business cycles, while providing buyers opportunities to redeploy assets to grow with a competitive advantage.

Speaker Change: a machinio segment continues on its record pace growing its established client base while expanding its services and its global markets

Jorge Celaya: Specifically, our consolidated third quarter of fiscal year 2024 financial results included. The GMV of $380.4 million is up 14% from $334 million in the same quarter last year. Revenue of $93.6 million was up 16% from $80.8 million in the same quarter last year. While gap earnings per share of 19 cents included some acquisition-related expenses and the recording of a legal settlement resulting in the lower earnings per share compared to the same quarter last year, non-GAAP adjusted earnings per share of $0.30 were up $0.02 or 7% from the same quarter last year, and non-GAAP adjusted EBITDA of $14.7 million was $1.4 million or 10% from the same quarter last year.

William Angrick: Our market research reveals that customers receive superior value through our machinio advertising and storefront products versus the competition. We expect to sustain midteens or better organic revenue growth going forward as machinio expands its market share in all geographies in Q4. Our capital asset group segment for GMB 7% year-over-year during Q3. Our results were lower than expectation due to several delayed or canceled sales outside of our control in the US and Asia regions.

Speaker Change: Specifically, our consolidated third quarter of fiscal year 2024 financial results included.

Speaker Change: The GMV of $380.4 million, up 14% from $334 million in the same quarter last year.

Speaker Change: Revenue of $93.6 million dollars, up 16%.

Speaker Change: from $80.8 million in the same quarter last year while

Speaker Change: Cap earnings per share of 19 cents included some acquisition related expenses and recording of a legal settlement resulting in the lower earnings per share compared to the same quarter last year.

Speaker Change: non-GAAP adjusted earnings per share of $0.30 up $0.02 or 7% from the same quarter last year.

William Angrick: However, we continue to have good success in signing new clients, adding over 33 new mandates for our industrial CAG pipeline during Q3. We also set a new record for unique sellers in our CAG heavy equipment fleet vertical during the quarter, which boasts well for continued growth of more predictable recurring revenue in our CAG segment. Finally, we continue to invest in platform improvements, including seller listing tools and asset templates to drive efficiency and convenience for sellers.

Speaker Change: and non-GAAP adjusted EBITDA of $14.7 million of $1.4 million or 10% from the same quarter last year.

Jorge Celaya: Our adjusted EBITDA for this fiscal third quarter was at 30% of the total of our segment's direct profit. We ended the fiscal third quarter with $136.8 million in cash, cash equivalents, and short-term investments. We generated $22.2 million of cash from operations during the fiscal third quarter. We continue to have zero debt and $25 million of available borrowing capacity under our credit facility.

Speaker Change: our adjusted ebitda for this fiscal third quarter was at thirty percent of the total of our segment's direct profits

Speaker Change: we ended the fiscal third quarter with aone hundred thirty-six point eight million dollars in cash cash equivalents and short-term investments we generated twenty-two point two million dollars of cash from operations during the fiscal third quarter

Speaker Change: We continue to have zero debt and $25 million of available borrowing capacity under our credit facility.

William Angrick: We continue to harness the potential of AI applications to improve the quality of asset listings and rich data useful for customers and enhance marketplace search functionality to optimally match available assets with our buyers purchasing criteria. Together, these enhancements will continue to improve our seller and buyer experience.

Jorge Celaya: Specifically, comparing segment results from this fiscal third quarter to the same quarter last year, the GovDeal segment's GMV was up 17%, revenue up 28%, and direct profit up 26%, each a new quarterly record as traditional product categories paired with a higher blended revenue take rate from expanded service offers. Our retail segment was up 9% on GMV and up 15% on revenue that set a new segment record, but it fell down 3% on segment direct profit, reflecting the higher proportion of purchase revenue in retail and the lower value product flows compared to last year.

Speaker Change: Specifically comparing segment results from this fiscal third quarter to the same quarter last year. The GovDeal segment's GMV was up 17%, revenue up 28%, and direct profit up 26%.

Speaker Change: Each a new quarterly record as traditional product categories paired with a higher blended revenue take rate from expanded service offerings.

William Angrick: In summary, we're well positioned strategically and financially in the current environment. Our solutions assist clients to weather the cyclicality of an uncertain macro environment. We have a robust business development pipeline and continue to pursue strategic opportunities in each segment of the circular economy to drive customer and shareholder value.

Speaker Change: Our retail segment was up 9% on GMV and up 15% on revenue.

Speaker Change: that set a new segment record, fall down 3% on segment direct profit, reflecting the higher proportion of purchase revenue in retail and the lower value product flows compared to last year.

Jorge Celaya: Revenue grew faster than GMV due to the higher purchase. Our CAG segment was up 7% on GMB, down 4% on revenue, and down 6% on segment direct profit, as consignment sales with partners in our industrial vertical grew, as did the heavy equipment category, yet this was partly offset by project delays in our energy vertical. Machinio's revenue was up 15%, and its segment direct profit was up 16% as we continue to increase recurring subscriptions and pricing for both equipment, advertising listings, and turnkey solutions for dealer management systems.

Speaker Change: Revenue grew faster than GMV due to the higher purchase flows.

Jorge Celaya: I'll turn it over to Jorge for more details on the quarter.

Speaker Change: Our tag segment was up 7% on GMB.

Jorge Celaya: Good morning. Our $380 million in GMV for this fiscal third quarter is a new record and a 14% increase over our previous record of $334 million set in the same quarter last year. Gutveels continues to set records, including for quarterly GMV at $250 million, expanding market share and new services. Our retail segment remains a trusted long-term business partner with the scale, flexibility, innovation and reliability and with broad multi-channel solutions to consistently address the needs of our seller clients.

Speaker Change: Down 4% on revenue and down 6% on segment direct profit.

Speaker Change: as consignment sales with partners in our industrial vertical grew as did the heavy equipment category, yet we're partly offset by project delays in our energy vertical.

Speaker Change: Machinio revenue was up 15% and its segment direct profit was up 16% as we continue to increase recurring subscriptions and pricing for both equipment, advertising listings, and turnkey solutions for dealer management systems.

Jorge Celaya: Moving to our fiscal fourth-quarter business outlook, we expect to continue double-digit consolidated GMV growth at the midpoint of our guidance range and solid overall results. As a reminder, as GovDeals has come off its seasonally high fiscal third quarter, revenue during this next fiscal fourth quarter is still expected to grow at a slightly faster year-over-year rate than GMB due to broader consignment service offerings. We anticipate growth in our retail segment, to be led predominantly by an expansion in purchase volume, resulting in overall retail revenue also growing faster than GMB and improved bottom-line results for the segment.

Speaker Change: Moving to our fiscal fourth quarter business outlook.

Jorge Celaya: The capital assets segment remains a global presence for corporate clients to monetize their fixed assets across economic and business cycles, while providing buyers opportunities to redeploy assets to grow with a competitive advantage. A machinio segment continues on its record pace, growing its established client base while expanding its services and its global markets. Specifically, our consolidated third quarter of fiscal year, 2024 financial results included. The GMV of $380.4 million, up 14% from $334 million in the same quarter last year, revenue of $93.6 million of 16% from $80.8 million in the same quarter last year.

Speaker Change: We expect to continue double-digit consolidated GMV growth at the midpoint of our guidance range and solid overall results.

Speaker Change: As a reminder, as GovDeals has come off its seasonally high fiscal third quarter,

Speaker Change: Revenue during this next fiscal fourth quarter is still expected to grow a slightly faster year-over-year rate than GMB due to broader consignment service offerings.

Speaker Change: We anticipate growth in our retail segment.

Speaker Change: to be led predominantly by an expansion in purchase volumes, resulting in overall retail revenue also growing faster than GMB and improved bottom line results for the segment.

Jorge Celaya: These volumes are mostly comprised of a mix of lower touch product volume and product flows and are expected to result in a lower retail segment direct profit as a percent of revenue. Our capital asset segment's outlook for this fiscal fourth quarter is for steady year-over-year performance and yet sequential growth. Our machinio subscription-based business is anticipated to continue to grow revenue by double digits year over year.

Speaker Change: These volumes are mostly comprised of a mix of lower touch product volume, product flows.

Jorge Celaya: While gap earnings per share of 19 cents included some acquisition related expenses and recording of a legal settlement resulting in the lower earnings per share compared to the same quarter last year. Non-gap adjusted earnings per share of 30 cents, up 2 cents, or 7% from the same quarter last year, and non-gap adjusted EBITDA of $14.7 million of $1.4 million or 10% from the same quarter last year. Our adjusted EBITDA for this fiscal third quarter was at 30% of the total of our segments direct profit.

Speaker Change: and are expected to result in a lower retail segment direct profit as a percent of revenue.

Speaker Change: Our capital asset segment's outlook for this fiscal fourth quarter is for steady year-over-year performance.

Speaker Change: yet sequential growth.

Speaker Change: Our machinio subscription-based business is anticipated to continue to grow revenue by double digits year over year.

Operator: Given the expected mix of segment volumes, which includes gov deals coming off its seasonally high quarter, and a mixed shift from the new retail program. We are anticipating our consolidated revenue as a percent of GMB to be higher in the high 20 percentage range for this coming fiscal fourth quarter, and our segments' direct profit as a percent of total revenue to be lower in the high 40 percent range. Management guidance for the fourth quarter of fiscal year 2024 is as follows.

Speaker Change: Given the expected mix of segment volumes, which includes gut deals coming off its seasonally high quarter, and a mixed shift from the new retail programs,

Speaker Change: We are anticipating our consolidated revenue as a percent of GMV to be higher in the high 20 percentage range for this coming fiscal fourth quarter. And our segments direct profit as a percent of total revenue to be lower in the high 40 percentage range.

Jorge Celaya: We ended the fiscal third quarter with $136.8 million in cash, cash equivalence and short term investments. We generated $22.2 million of cash from operations during the fiscal third quarter. We continue to have zero debt and $25 million of available borrowing capacity under our credit facility. Specifically comparing segment results from this fiscal third quarter to the same quarter last year, the Gug Deal segments GMV was up 17% revenue up 28% and direct profit up 26%.

Operator: We expect GMB to range from $330 million to $365 million. Gap net income is expected in the range of $5 million to $7 million, with a corresponding gap diluted earnings per share ranging from 16 cents to 22 cents per share. Non-GAAP adjusted diluted earnings per share is estimated in the range of $0.25 to $0.32 per share. We estimate non-GAAP adjusted EBITDA to range from $12 million to $15 million. The GAAP and non-GAAP EPS guidance assumes that we have approximately 31.5 to 32 million fully diluted weighted average shares outstanding for the fourth quarter of fiscal year 2024. Thank you. We will now take your questions.

Speaker Change: Management guidance for the fourth quarter of fiscal year 2024 is as follows.

Speaker Change: We expect GMV to range from $330 million to $365 million.

Speaker Change: Gap net income is expected in the range of $5 million to $7 million with a corresponding gap diluted earnings per share ranging from $0.16 to $0.22 per share.

Jorge Celaya: Each a new quarterly record as traditional product categories paired with a higher blended revenue take rate from expanded service offerings. Our retail segment was up 9% on GMV and up 15% on revenue that set a new segment record. All down 3% on segment direct profit, reflecting the higher proportion of purchase revenue in retail and the lower value product flows compared to last year. Revenue grew faster than GMV due to the higher purchase flows.

Speaker Change: Non-gap adjusted diluted earnings per share is estimated in the range of 25 cents to 32 cents per share.

Speaker Change: We estimate non-GAAP adjusted EBITDA to range from $12 million to $15 million.

Speaker Change: The GAAP and non-GAAP EPS guidance assumes that we have approximately 31.5 to 32 million fully diluted weighted average shares outstanding for the fourth quarter of fiscal year 2024.

Operator: Thank you. We will now begin the question and answer session. If you have a question, please press star 11 on your telephone and wait for your name to be announced. If you wish to be removed from the queue, please press star 11 again. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers.

Speaker Change: Thank you, and we will now take your questions.

Speaker Change: Thank you. We will now begin the question and answer session. If you have a question, please press star 11 on your telephone and wait for your name to be announced.

Jorge Celaya: Our tag segment was up 7% on GMV down 4% on revenue and down 6% on segment direct profit as confinement sales with partners in our industrial vertical grew as did the heavy equipment category yet will partly offset by project delays in our energy vertical. Machine or revenue was up 15% and its segment direct profit was up 16% as we continue to increase recurring subscriptions and pricing for both equipment advertising listings and turnkey solutions for dealer management systems.

Speaker Change: If you wish to be removed from the queue, please press star 11 again. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers.

Operator: One moment for our first question. Gary Prestopino from Barrington Research is on the line with a question. Your line is now open.

Speaker Change: One moment for our first question.

Speaker Change: Gary Prestopino from Barrington Research is on the line with a question. Your line is now open.

Gary Prestopino: Hey, good morning Bill and Jorge. Bill, you were talking about seeing some evidence of softening prices in gov deals. Is that really a direct reflection of what's going on in the vehicle, used vehicle market?

Jorge Celaya: Moving to our fiscal fourth quarter business outlook. We expect to continue double digit consolidated GMV growth at the midpoint of our guidance range and solid overall results. As a reminder, as Gug deals has come off its seasonally high fiscal third quarter revenue during this next fiscal fourth quarter is still expected to grow as slightly faster year over year rate than GMV due to broader consignment service offers. We anticipate growth in our retail segment to be led predominantly by an expansion in purchase volumes resulting in overall retail revenue also growing faster than GMV and improved bottom line results for the segment.

Gary Prestopino: Hey, good morning Bill and Jorge. Bill, you were talking about seeing some evidence of softening prices in gov deals. Is that just a really a direct reflection of what's going on in the vehicle, used vehicle market?

William Angrick: In fact, we've seen some softening with fleet assets, both vehicles and construction equipment.

Speaker Change: Correct. We've seen some softening with fleet assets, both vehicle and construction equipment.

Gary Prestopino: But at the same time, you know, from what I'm hearing about the industry, supply is starting to kick up at a fairly steady pace. Are you seeing that as well in your markets, realizing you don't really tangentially follow the wholesale auction market for vehicles that are used by consumers? But what can you say about some of the supply issues there compared to the constraints you were feeling?

Gary Prestopino: Okay.

Speaker Change: But at the same time, you know, from what I'm hearing about the industry, the supply is starting to kick up.

Speaker Change: at a fairly steady pace.

Speaker Change: Unknown Speaker Are you seeing that as well in your markets? I mean, realizing you don't really can generally follow the wholesale auction market for vehicles that are used by consumers, but what can you say about some of the

Speaker Change: supply issues there that the constraints you were feeling.

William Angrick: We have no headwinds related to supply. The government market has the intent to buy, the budget to buy, and continues its sort of replenishment cycle. So that has been very steady for us.

Jorge Celaya: These volumes are mostly comprised of a mix of lower touch product volume product flows and are expected to result in a lower retail segment direct profit as a percent of revenue. Our capital asset segments outlook for this fiscal fourth quarter is for steady year year performance yet sequential growth. Our machine of subscription based business is anticipated to continue to grow revenue by double digits year over year. Given the expected mix of segment volumes, which includes gut deals coming off its seasonally high quarter and a mix shift from the new retail programs, we are anticipating our consolidated revenue as a percent of GMB to be higher in the high 20% range for this coming fiscal quarter and our segments to our profit as a percent of total revenue to be lower in the high 40% range.

Speaker Change: We have no headwinds related to supply. The government market has intent to buy, the budget to buy, and continues its sort of replenishment cycle. So that has been very steady for us.

Gary Prestopino: Okay, and then the second question is, you talked about the R.S. CIG segment, and you launched a single item recovery tool. Could you maybe discuss that or what that tool is?

Speaker Change: Okay, and then second question is, you talked about the R.S.

Speaker Change: CG segment. You launched a single item recovery tool. Could you

William Angrick: The term I used was single item receiving tool, and what that allows, and essentially it's harnessing, a channel for each item received from the flow of return goods and the use of that tool does a couple things. One, it helps us optimize the operational process. So it automates something that had historically been more manual. So it's driving efficiencies to it's accelerating the listing of the items so faster time to cash, and three, giving us attributes that allow us to determine should the item go in a B2B channel versus a direct-to-consumer channel, which ultimately drives higher recovery. So we're pleased with that enhancement.

Speaker Change: Maybe discuss that or what that tool is.

Speaker Change: standardize available data into a receiving tool that allows us to quickly identify the right channel or each item received from the flow of return goods and the use of that tool

Jorge Celaya: Management guidance for the fourth quarter of fiscal year 2024 is as follows. We expect GMB to range from $330 million to $365 million. Gap net income is expected in the range of $5 million to $7 million with a corresponding gap diluted earnings per share ranging from $16 to $22 per share. Non-gap adjusted diluted earnings per share is estimated in the range of $0.25 to $32 per share. We estimate non-gap adjusted evaduct to range from $12 million to $15 million. The gap in non-gap EPS guidance assumes that we have approximately 31.5 to 32 million fully diluted weighted average shares outstanding for the fourth quarter of fiscal year 2024.

Speaker Change: does a couple things. One, it helps us optimize the operational process so it

Speaker Change: Automate something that has historically been more manual, so it's driving efficiencies. Two, it's accelerating the listing of the items, so faster time to cash.

Speaker Change: and three, giving us attributes that allows us to determine should the item go in a B2B channel versus a direct-to-consumer channel, which ultimately drives higher recovery. So we're pleased with that enhancement.

Gary Prestopino: Okay, and then just lastly, in the CAG segment, do you feel that some of these delayed asset sales that you cited in your commentary will be completed or done in Q4, and as well as with the 33 new mandates that you got in Q3, when will that start flowing into the GMV mix?

Speaker Change: Asset sales that you cited in your commentary, will they be

Unknown Executive: Thank you and we will now take your questions. Thank you.

Speaker Change: completed or done in q four and as well as with the thirty-three new mandates that you've got in q three when does that

Unknown Executive: We will now begin the question and answer session. If you have a question, please press star 11 on your telephone and wait for your name to be announced. If you wish to be removed from the queue, please press star 11 again. If you are using a speaker phone, you may need to pick up the handset first before pressing the numbers. One moment for our first question.

William Angrick: Yeah, mandates will ripen over the next few quarters. I think some of these delays reflect the macro volatility we have where, you know, corporate America can sometimes stop and start different initiatives depending upon, you know, their internal forecasts for demand or, you know, what they want to do with mergers, consolidations, and cost-cutting exercises. So, importantly, it has nothing to do with us. It really has to do with these are downstream or, you know, call it upstream decisions that affect the disposition of assets.

Speaker Change: start flowing into the GMV mix.

Speaker Change: yes mandates will ripe and over the next few quarters

Speaker Change: I think some of these delays reflect the

Speaker Change: the macrovolatility we have where corporate america

Speaker Change: can sometimes stop and start different initiatives depending upon their internal forecast for demand or what they want to do with mergers, consolidations, cost-cutting exercises.

Gary Prestopino: Gary Presipino from Barrington research is on the line with a question. Your line is now open. Hey, the morning bill and Jorge. Bill, you were talking about seeing some evidence of softening prices and God deals. That's just a really a direct reflection of what's going on in the vehicle use vehicle market. Correct. We've seen some softening with fleet assets, both vehicle and construction equipment. Okay. But at the same time, you know, from what I'm hearing about the industry, the supply is starting to kick up.

Speaker Change: So, importantly, it has nothing to do with us. It really has to do with these are downstream or, you know, call it upstream decisions that affect the disposition of assets. What we like is the fact that we're winning.

William Angrick: What we like is the fact that we're winning, you know, very high percentage of anything that we're pitching, and we're getting recurring flow business, what we call corporate forward flow, recurring flow business from, you know, brand name Fortune 500, Fortune 1000 companies. So, whenever the assets do go to market, it will be the marketplace that handles those transactions. So, some percentage of them will fall into Q4, some, you know, Q1 or Q2 of fiscal 25. Okay, thank you very much.

Speaker Change: you know, a very high percentage of anything that we're pitching.

Speaker Change: and we're getting recurring flow business corp what we call corporate forward flow recurring flow business from brand a fortune five hundred four one thousand companies so whenever the assets do go to market will be the marketplace that handles those transactions

Speaker Change: So some percentage of them will fall into Q4, some, you know, Q1 or Q2 of fiscal 25.

Gary Prestopino: I had a fairly steady pace. You know, are you seeing that as well in your markets? I mean, realizing you don't really can generally follow the wholesale auction market for vehicles that are used by consumers. But what can you say about some of the supply issues there that the constraints you were feeling? We have no headwinds related to supply. The government market has intent to buy the budget to buy and continues its sort of replenishment cycle. So that has been very steady for us.

Speaker Change: Okay, thank you very much.

Operator: George Sutton from Craig Hallam is on the line with a question. Your line is now open.

Speaker Change: Thank you.

Speaker Change: George Sutton from Craig Hallam is on the line with a question. Your line is now open.

George Sutton: Bill, nice results, and you characterize the current environment as challenging. And I wanted to kind of think through how you're thinking about the concept of you just being a growth cyclical, meaning your business grows, but you do have cyclical components. And I'm trying to understand the positives and the negatives relative to the cyclicality. In other words, you referred to pricing, in some cases, a challenge, and we obviously had some deals push back, those may be macro related.

George Sutton: a bill nice results and you you characterize the current environment as challenged and i wanted to kind of think through how you're thinking about the concept of you just being a growth cyclical meaning

Speaker Change: your business that grows, but you do have cyclical components and

Speaker Change: I'm trying to understand the positives and the negatives relative to the cyclicality. In other words, you referred to pricing in some cases a challenge, and we obviously had some deals pushed. Those may be macro-related.

Unknown Executive: Okay, and then the second question is, you talked about the RS-CG segment, you launched a single item recovery tool.

George Sutton: But on the alternative side, you would seem to be a wonderful place to be if we sit here today, concerned about the future of the economy given the two-sided marketplace. Can you just discuss that and your thoughts?

Speaker Change: But on the alternative side, you would seem to be a wonderful place to be if we sit here today concerned about the future of the economy given the two-sided marketplace. Can you just discuss that and your thoughts?

William Angrick: Could you maybe discuss that or what that tool is? Sure. The term I use was single item receiving tool and what that allows, and essentially it's harnessing standardized available data into a receiving tool that allows us to quickly identify the right channel for each item received from the flow of return goods and the use of that tool as a couple of things. One, it helps us optimize the operational process so it would automate something that had historically been more manual, so it's driving efficiencies to it's accelerating the listing of the item so faster time to cache and three giving us attributes that allows us to determine should the item go in a B2B channel versus a direct consumer channel, which ultimately drives higher recovery, so we're pleased with that enhancement.

William Angrick: Sure. Well, we're a huge engine for monetizing assets. So whether a Fortune 100 company or government agency, you know, wants to manage it. Unknown Executive, Liquidity Services Inc.

Speaker Change: sure while we're a huge engine for a monetizing assets so whether fortune one hundred company or govern agency wants to manage its

Speaker Change: balance sheet more sharply. We're a natural place to look to to help

Speaker Change: Husband Resources during

Speaker Change: Slow growth environment. So we see, you know, some tailwinds from

Speaker Change: Slowing growth because if that asset

William Angrick: Unknown Executive, William Angrick

William Angrick: If you look at the total GMV of the company, CAG, which is probably the lumpiest, it only represents about 20% of the pie. So there's muted cyclicality relative to these large industrial assets that may move around from one quarter to the next. What we've seen is strong... Tailwinds as both, you know, government clients are trying to be more efficient, using digital solutions, faster sales cycle, faster time to cash, less work, freeing up physical space, you know, to sell these assets quickly. I think the buyer side of our marketplace is frugal, you know, they're looking to save money, and we're a natural marketplace to go to buy something, you know, at less So that's been great.

Speaker Change: which is probably the lumpiest, it only represents about 20% of the pie. So there's muted cyclicality relative to these large industrial assets that may move around from one quarter to the other. What we've seen is, you know, strong

William Angrick: Okay, and then just lastly, in the CAG segment, do you feel that some of these delayed asset sales that you cited in your commentary will they be completed or done in Q4, and as well as with the 33 new mandates that you got in Q3, when does that start flowing into the GMB mix? Yeah, mandates will ripen over the next few quarters. I think some of these delays reflect the macro volatility we have where corporate America can sometimes stop and start different initiatives depending upon their internal forecast for demand or what they want to do with mergers, consolidations, cost-cutting exercises, so importantly, it had nothing to do with us, it really has to do with these are downstream or call it upstream decisions that affect this position of assets.

Speaker Change: tailwinds as both, you know, government clients.

Speaker Change: are trying to be...

Speaker Change: One more efficient, you know, using digital solutions, you know, faster sales cycle, faster time to cash, less work.

Speaker Change: freeing up physical space to sell these assets.

Speaker Change: Quickly, I think to the buyer side of a marketplace is

Speaker Change: frugal, you know, they're looking to save money and we're a natural marketplace to go to buy something, you know, at less than even wholesale cost.

George Sutton: And then on the retail side, you know, we are the trusted provider. We're where the market has migrated to get good execution around tracking, managing, and monetizing return goods. This is a market that continues to grow. It's growing through any sort of recessionary trend. It's just a fact of this makeshift from in-person to online shopping. And so we expanded our capabilities; there was a press release out about our Brownsburg, Indiana facility; it's a larger facility, it's responding to marketplace needs for, you know, B2B and direct consumer flows.

Speaker Change: and save money and help build their business or, you know, use an asset, you know, in their operation. So that's been great. And then on the retail side,

Speaker Change: You know, we are the trusted provider, you know, we're where the market has migrated.

Speaker Change: to get good execution around tracking, managing,

Speaker Change: This is a market that continues to grow.

William Angrick: What we like is the fact that we're winning very high percentage of anything that we're pitching and we're getting recurring flow business, what we call corporate forward flow, recurring flow business from a brand-aid fortune, 500, 421,000 companies, so whenever the assets do go to market, it will be the marketplace that handles those transactions, so some percentages will fall into Q4, you know, Q1 or Q2 of fiscal 25.

Speaker Change: It's growing through any sort of recessionary trend. It's just a fact of, you know, this makeshift from in-person to online shopping. And so we

Speaker Change: Expanded our capabilities. There was a press release out on our Brownsburg, Indiana facility. It's a larger facility. It's responding to marketplace needs for you know B2B and direct-to-consumer flows. So we have a resilient

George Sutton: So we have a resilient, scalable model for the retail supply chain to continue to be more efficient around, you know, managing and selling returned merchandise. And we think that's a constant cyclical, honestly, it's a, you know, market that continues to grow.

Unknown Executive: Okay, thank you very much. Thank you.

Speaker Change: scalable model for the retail supply chain to continue to be more efficient around, you know, managing and selling of returned merchandise. And we think that's a constant cyclical, honestly, it's a, in all markets, you know, that continues to grow.

George Sutton: George Sutton from Craig, Helen is on the line with the question, your line is now open. Bill, nice results and you characterize the current environment as challenged and I wanted to kind of think through how you're thinking about the concept of you just being a growth cyclical meaning your business that grows, but you do have cyclical components and I'm trying to understand the positives and the negatives relative to the cyclicality. In other words, you referred to pricing in some cases a challenge and we obviously had some deals push, those may be macro related, but on the alternative side, you would seem to be a wonderful place to be if we sit here today concerned about the future of the economy given the two-sided marketplace.

William Angrick: And then just one other question, in pointing to the strong results for the quarter, you specifically referred to service expansion. I just want to make sure I understood what you were referring to there.

Speaker Change: Great and then just one other question in in pointing to the strong results for the quarter you specifically referred to service expansion I just want to make sure I knew what you were referring to there

William Angrick: Sure. We've given clients different tools to sort of opt into what is most relevant for them, and I mentioned both, self-directed solutions that clients can use to identify and upload assets directly. They pay a lower commission for that, and many clients opt to do that. We also provide fully managed offerings, and that's reflective of some of our facility expansions where clients have directed consumers who have returns to return those to our facilities.

Speaker Change: Sure. We've given clients different tools to sort of opt into what is

Speaker Change: most relevant for them and I mentioned both. Self-directed solutions where

Speaker Change: clients can use our solutions to

Speaker Change: identify and upload assets directly. They pay a lower commission for that and many clients opt to do that. We also provide fully managed offerings and that's reflective of some of our facility expansions where clients have directed

George Sutton: Can you just discuss that in your thoughts? Sure. Well, we're a huge engine for monetizing assets. So, whether a fortune 100 company or government agency wants to manage its balance sheet, more sharply, we're a natural place to look to to help them husband resources during slow growth environment. So, we see some tailwinds from slow and growth because if that asset can't be used productively and generate some sort of a return for the owner, it's going to be sold.

William Angrick: So it removes a leg of transportation back to a retailer's return center. So we've created tools, services, and space to take items back directly from consumers. You know, we also have services in the government and fleet business where if a client is shorthanded, we can dispatch an individual to help them catalog assets. And, you know, the CR auction business we acquired had a history of doing that. And that's allowed us to provide semi-assisted services to, you know, access more fleet business. So those are the things that we've been talking about when we refer to services.

Speaker Change: consumers who have the returns to return those to our facilities so it removes a leg of transportation back to a retailer's return center so we've created

Speaker Change: tools and and services and the space to take items back directly from consumers.

Speaker Change: We also have services in the government and fleet business where if a client

George Sutton: And we're the natural place to take it to market. So, that's going to be positive. And I think when you look at the total DMV of the company, you know, CAG, which is probably the lumpiest, you know, only represents about 20% of the pie. So, there's muted cyclicality relative to these large industrial assets that may move around from one quarter to the other. What we've seen is, you know, strong tailwinds as both, you know, government clients are trying to be one more efficient, you know, using digital solutions, you know, faster sales cycle, faster time to cash, less work, you know, freeing up physical space, you know, to sell these assets quickly.

Speaker Change: is shorthanded, we can dispatch.

Speaker Change: an individual to help them catalog assets and the crr auxction business we acquired had a history of doing that

Speaker Change: and that's allowed us to provide semi-assisted services to, you know, access more fleet business. So those are the things that we've been talking about when we refer to services.

Operator: Thank you very much. We have no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Operator: We have no further questions at this time. Thank you for your participation in today's conference. This does conclude the program.

Speaker Change: Very good. Thank you very much.

Speaker Change: We have no further questions at this time.

Operator: You may now disconnect. [music] Narrator- Gary Prestopino, Producer- Gary Prestopino, Art- Gary Prestopino, Music- Gary Prestopino Welcome to the Liquidity Services, Inc. third quarter of fiscal year 2024 financial results conference call. My name is Lauren Cannon, and I will be your operator for today's call. Please note that this conference call is being recorded. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. I will now turn the call over to Michael Patrick, Liquidity Services Vice President and Controller.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

George Sutton: I think two, the buyer side of a marketplace is frugal. You know, they're looking to save money and we're a natural marketplace to go to buy something, you know, at less than even wholesale costs and save money and help build their business or, you know, use an asset, you know, in their operations. So, that's been great. And then on the retail side, you know, we are the trusted provider, you know, where the market has migrated to get good execution around tracking managing and monetizing return goods.

George Sutton: This is a market that continues to grow. It's growing through any sort of recessionary trend. It's just a fact of, you know, this makeshift from in person to online shopping. And so we expanded our capabilities. There was a press release out on our Brownsburg, Indiana facility. It's a larger facility. It's responding to marketplace needs for, you know, B2B and direct consumer flows. So, we have a resilient, scalable model for the retail supply chain to continue to be more efficient around, you know, managing and selling of returned merchandise. And we think that's a constant cyclical, honestly, it's a, you know, markets, you know, that continues to grow.

Speaker Change: www.LiquidityServices.com www.LiquidityServices.com www.LiquidityServices.com

William Angrick: Great. And then just one other question in pointing to the strong results for the quarter, you specifically referred to service expansion. I just want to make sure I knew what you were referring to there. Sure. We've given clients different tools to sort of opt into what is most relevant for them. And I mentioned both self-directed solutions where Clients can use our solutions to identify and upload assets directly. They pay a lower commission for that, and many clients opt to do that.

Speaker Change: www.LiquidityServices.com www.LiquidityServices.com www.LiquidityServices.com

William Angrick: The CR auction business we acquired had a history of doing that, and that's allowed us to provide semi-assisted services to access more fleet business, so those are the things that we've been talking about when we refer to services.

Speaker Change: why know

Speaker Change: oh

Lauren Cannon: Welcome to the Liquidity Services Inc. 3rd Quarter of Fiscal Year 2024 Financial Results Conference Call. My name is Lauren Cannon and I will be your operator for today's call. Please note that this conference call is being recorded.

Speaker Change: Good morning. On the call today are Bill Angrick, our Chairman and Chief Executive Officer, and Jorge Celaya, our Executive Vice President and Chief Financial Officer.

Speaker Change: They will be available for questions after their prepared remarks.

Speaker Change: The following discussion and responses to your questions reflect management's views as of today, August 8, 2024, and will include forward-looking statements.

Speaker Change: actual results may differ materially

Unknown Executive: Very good.

Speaker Change: As you listen to today's call, please have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter.

Speaker Change: During this call, management will discuss certain non-GAAP financial measures.

Speaker Change: Management also uses certain supplemental operating data as a measure of certain components of operating performance, which we also believe is useful for management and investors.

Speaker Change: The supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results.

Speaker Change: At this time, I will turn the presentation over to our Chairman and CEO , Bill Angrick. Good morning, and welcome to our Q3 earnings call.

Bill Angrick: I'll review our Q3 performance and the progress of our business segments, and next Jorge Celaya will provide more details on the quarter.

William Angrick: We're proud to report record GMV this quarter, $380 million, driven by market share gains, expanded services, and outstanding prior participation. These results provide a strong proof point that we are on track to achieve our near-term goal of $1.5 billion in annual GMV. Additionally, our scalable platform continues to drive profitable growth. And in Q3, we delivered our highest quarterly GAAP net income in fiscal year 2024 and the strongest non-GAAP adjusted EBITDA performance in a decade, our flexible services ranging from self-directed to fully managed offerings and efforts to harness the benefits of AI technologies, are continuing to attract more sellers and buyers, enhancing the size and scale of our marketplace, and Fueling Our Growth. Our gov deal segment set a quarterly GMB record of $250 million.

Jorge Celaya: We're proud to report record GMV this quarter, $380 million.

Speaker Change: Driven by market share gains.

Speaker Change: Expanded Services

Speaker Change: and outstanding prior participation.

Jorge Celaya: These results provide a strong proof point that we are on track to achieve our near-term goal of 1.5 billion dollars in annual GMV.

Speaker Change: Additionally, our scalable platform continues to drive profitable growth.

Speaker Change: And in Q3, we delivered our highest quarterly gap net income in fiscal year 2024 and strongest non-gap adjusted EBITDA performance in a decade.

Speaker Change: Our flexible services, ranging from self-directed to fully managed offerings and efforts to harness the benefits of AI technologies, are continuing to attract more sellers and buyers, enhancing the size and scale of our marketplace.

Speaker Change: and Fueling Our Growth.

Speaker Change: Our GovDeal segment set a quarterly GMV record of $250 million.

William Angrick: Driven by continued seller acquisition and service expansion. While we have seen evidence of softening prices, GovDeals recorded strong year-over-year growth in vehicle sales and set numerous records, including the number of sellers, the number of asset listings, and the number of vehicle listings during Q3. We continue to expand our market share together with the recently acquired Sierra Auction Business and signed notable new clients during Q3, including the State of New York, Spokane County, Washington, Norman, Oklahoma, and Mesa, Arizona.

Speaker Change: Driven by continued seller acquisition and service expansion.

Speaker Change: While we have seen evidence of softening prices,

Speaker Change: Gov deals recorded strong year-over-year growth in vehicle sales and set numerous records including the number of sellers, number of asset listings, and number of vehicle listings during Q3.

Speaker Change: We continue to expand our market share together with the recently acquired Sierra Auction business and signed notable new clients during Q3, including the State of New York.

Speaker Change: Spokane County, Washington, Norman, Oklahoma, and Mesa, Arizona.

Unknown Executive: Thank you very much.

William Angrick: Additionally, in our Bid for Assets Marketplace, which is included in our Cub Deals segment results, we are now ramping up our Philadelphia contract and have signed several new Sheriff contracts in the states of Pennsylvania and Louisiana. Our Retail Supply Chain Group segments focus on exceptional service delivery to its seller clients has been rewarded with increased volumes, which are poised to accelerate further in the fourth quarter. We launched the first phase of our single item receiving tool, which will enhance operational efficiencies for both our B2B and B2C channels.

Speaker Change: Our Retail Supply Chain Group segments focus on exceptional service delivery to its seller clients, has been rewarded with increased volumes, which are poised to accelerate further in the fourth quarter.

Speaker Change: We launched the first phase of our single item receiving tool, which will enhance operational efficiencies for both our B2B and B2C channels.

William Angrick: During Q3, we onboarded several new clients for utilizing our All Surplus Deals B2C channel, and we expanded our relationship with several longstanding clients. Together, these efforts will result in continued growth in Q4 and beyond in our RSEG segment. Our Machinio segment set another revenue record as it continues to be a leader in matching buyers and sellers of used equipment around the globe. Our market research reveals that customers receive superior value through our Machinio advertising and storefront products versus the competition.

Speaker Change: During Q3, we onboarded several new clients who are utilizing our All Surplus Deals B2C channel and we expanded our relationship with several long-standing clients.

Speaker Change: together these efforts will result in continued growth

Speaker Change: and Q4 and beyond in our RSEG segment.

Speaker Change: Our Machinio segment set another revenue record as it continues to be a leader in matching buyers and sellers of used equipment around the globe.

Speaker Change: Our market research reveals that customers receive superior value through our machinio advertising and storefront products versus the competition.

Unknown Executive: We have no further questions at this time.

Unknown Executive: Thank you for your participation in today's conference.

Speaker Change: We expect to sustain mid-teens or better organic revenue growth going forward as Machinio expands its market share in all geographies in Q4.

Unknown Executive: This does conclude the program.

Unknown Executive: You may now disconnect. Thank you.

Speaker Change: Our Capital Asset Group segment grew GMV 7% year-over-year during Q3, but results were lower than expectation due to several delayed or cancelled sales outside of our control in the U.S. and Asia regions.

Michael Patrick: George Sutton, Gary Prestopino, Jorge Celaya, George Sutton, Gary Prestopino, Jorge Celaya, George Sutton, Gary Prestopino, Jorge Celaya, George Sutton, Gary Prestopino,[inaudible] On the call today, our Bill Angrick, our Chairman and Chief Executive Officer, and Jorge Celaya, our Executive Vice President and Chief Financial Officer. They will be available for questions after their prepared remarks. The following discussion and responses to your questions reflect management's views as of today, August 8, 2024, and will include forward-looking statements.

Speaker Change: However, we continue to have.

Speaker Change: Good success in signing new clients, adding over 33 new mandates to our industrial CAG pipeline during Q3.

Michael Patrick: Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and in filings with the SEC, including our most recent annual report on form 10K. As you listen to today's call, please have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. During this call, management will discuss certain non-gap financial measures.

William Angrick: We also set a new record for unique sellers in our CAG heavy equipment fleet vertical during the quarter, which bodes well for continued growth of more predictable recurring revenue in our CAG segment. Finally, we continue to invest in platform improvements, including seller listing tools and asset templates, to drive efficiency and convenience for sellers. We continue to harness the potential of AI applications to improve the quality of asset listings, enrich data useful for customers, and Enhance Marketplace Search Functionality to Optimally Match available assets with our buyer's purchasing criteria.

Michael Patrick: In our press release and filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-gap measures, including the reconciliation of these measures with their most comparable gap measures as available. Management also uses certain supplemental operating data as a measure of certain components of operating performance, which we also believe is useful for management and investors. The supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to gap results.

William Angrick: At this time, I will turn the presentation over to our chairman and CEO Bill Angard. Good morning, and welcome to our Q3 earnings call. I'll review our Q3 performance in the progress of our business segments.

Speaker Change: Finally, we continue to invest in platform improvements, including seller listing tools and asset templates.

Speaker Change: to drive efficiency and convenience for our sellers.

Speaker Change: We continue to harness the potential of AI applications to improve the quality of asset listings.

Speaker Change: Enriched data useful for customers.

Speaker Change: and Enhance Marketplace Search Functionality to Optimally Match Available Assets with our Buyer's Purchasing Criteria.

William Angrick: Together, these enhancements will continue to improve our seller and buyer experience. In summary, we are well positioned strategically and financially in the current environment. Our solutions assist clients to weather the cyclicality of an uncertain macro environment. We have a robust business development pipeline and continue to pursue strategic opportunities in each segment of the circular economy to drive customer and shareholder value. And I'll turn it over to Jorge for more details on the quarter.

Speaker Change: Together, these enhancements will continue to improve our seller and buyer experience.

Speaker Change: In summary, we're well positioned strategically and financially in the current environment.

Speaker Change: Our solutions assist clients to weather the cyclicality of an uncertain macro environment.

Speaker Change: We have a robust business development pipeline and continue to pursue strategic opportunities in each segment of the circular economy to drive customer and shareholder value.

Speaker Change: And I'll turn it over to Jorge for more details on the quarter.

Jorge Celaya: Good morning.

Jorge Celaya: Our $380 million in GMV for this fiscal third quarter is a new record and a 14% increase over our previous record of $334 million set in the same quarter last year.

Jorge Celaya: GovDeals continues to set records, including for quarterly GMV at $250 million.

Jorge Celaya: Expanding Market Share and New Services

Jorge Celaya: Our retail segment remains a trusted, long-term business partner with the scale, flexibility, innovation, and reliability, and with broad multi-channel solutions to consistently address the needs of our seller clients.

Speaker Change: A machinio segment continues on its record pace, growing its established client base while expanding its services and its global markets.

Jorge Celaya: Specifically, our consolidated third quarter of fiscal year 2024 financial results included GMV of $380.4 million, up 14% from $334 million in the same quarter last year. Revenue of $93.6 million, up 16% from $80.8 million in the same quarter last year, while GAAP earnings per share of 19 cents included some acquisition-related expenses and the recording of a legal settlement resulting in the lower earnings per share compared to the same quarter last year.

Speaker Change: Specifically, our consolidated third quarter of fiscal year 2024 financial results included.

Speaker Change: The GMV of $380.4 million, up 14% from $334 million in the same quarter last year.

Speaker Change: Revenue of $93.6 million dollars, up 16%.

Speaker Change: from $80.8 million in the same quarter last year, while gap earnings per share of 19 cents included some acquisition-related expenses and recording of a legal settlement resulting in the lower earnings per share compared to the same quarter last year.

Jorge Celaya: Non-GAAP adjusted earnings per share of $0.30, up $0.02 or 7% from the same quarter last year, and non-GAAP adjusted EBITDA of $14.7 million, $1.4 million, or 10% from the same quarter last year. Our adjusted EBITDA for this fiscal third quarter was at 30% of the total of our segment's direct profit. We ended the fiscal third quarter with $136.8 million in cash, cash equivalents, and short-term investments. We generated $22.2 million of cash from operations during the fiscal third quarter. We continue to have zero debt and $25 million of available borrowing capacity under our credit facility.

Speaker Change: Non-GAAP-adjusted earnings per share of $0.30 up $0.02 or 7% from the same quarter last year.

Speaker Change: and non-GAAP Adjusted EBITDA of $14.7M up $1.4M or 10% from the same quarter last year.

Speaker Change: Our adjusted EBITDA for this fiscal third quarter was at 30% of the total of our segment's direct profits.

Speaker Change: We ended the fiscal third quarter with $136.8 million in cash, cash equivalents, and short-term investments. We generated $22.2 million of cash from operations during the fiscal third quarter.

Speaker Change: We continue to have zero debt and $25 million of available borrowing capacity under our credit facility.

Speaker Change: each a new quarterly record as traditional product categories paired with a higher blendended revenue take rate from expanded service offerings

Speaker Change: Our retail segment was up 9% on GMV and up 15% on revenue.

Speaker Change: that set a new segment record, all down 3% on segment direct profit, reflecting the higher proportion of purchase revenue in retail and the lower value product flows compared to last year.

Speaker Change: Revenue grew faster than GMV due to the higher purchase flows.

William Angrick: The next Jorge Celaya will provide more details on the quarter. We're proud to report record GMV this quarter of $380 million, driven by market share gains, expanded services, and outstanding higher participation. These results provide a strong proof point that we are on track to achieve our near-term goal of $1.5 billion in annual GMV. Additionally, our scalable platform continues to drive profitable growth. And in Q3, we delivered our highest quarterly gap net income in fiscal year 2024, and strongest non-gap-adjusted EBITDA performance in a decade.

William Angrick: Our flexible services ranging from self-directed to fully managed offerings and efforts to harness the benefits of AI technologies are continuing to attract more sellers and buyers, enhancing the size and scale of our marketplace and fueling our growth. Our GovDeal segment set a quarterly GMV record of $250 million, driven by continued seller acquisition and service expansion. While we have seen evidence of softening prices, GovDeals recorded strong year-over-year growth in vehicle sales and set numerous records, including the number of sellers, number of asset listings, and number of vehicle listings during Q3.

William Angrick: We continue to expand our market share together with the recently acquired Sierra Auction business and signed notable new clients during Q3 including the state of New York, Spokane County Washington, Norman and Oklahoma and Mesa, Arizona. Additionally, and our bid for assets marketplace, which is included in our Cup deals segment results, we are now ramping our Philadelphia contract and have signed several new share of contracts in the states of Pennsylvania and Louisiana.

William Angrick: Our retail supply chain group segments focus on exceptional service delivery to its seller clients has been rewarded with increased volumes which are poised to accelerate further in the fourth quarter. We launch the first phase of our single item receiving tool which will enhance operational efficiencies for both our B2B and B2C channels. During Q3, we onboarded several new clients for utilizing our all surplus deals B2C channel and we expanded our relationship with several long standing clients.

William Angrick: Together, these efforts will result in continued growth in Q4 and beyond in our RSEG segment. Our machining segment set another revenue record as it continues to be a leader in matching buyers and sellers that use equipment around the globe. Our market research reveals that customers receive superior value through our machining advertising and soarfront products versus the competition. We expect to sustain midteens or better organic revenue growth going forward as machiningo expands its market share and all geographies in Q4.

William Angrick: Our capital asset group segment for GMV, 7 percent year over year during Q3, our results were lower than expectation due to several delayed or canceled sales outside of our control in the US and Asia regions. However, we continue to have good success in shining new clients, adding over 33 new mandates to our industrial cag pipeline during Q3. We also set a new record for unique sellers in our cag heavy equipment fleet vertical during the quarter which boasts well for continued growth of more predictable recurring revenue in our cag segment.

William Angrick: Finally, we continue to invest in platform improvements including seller listing tools and asset templates to drive efficiency and convenience for sellers. We continue to harness the potential of AI applications to improve the quality of asset listings and rich data useful for customers, and Enhanced Marketplace Search functionality to optimally match available assets with our buyer's purchasing criteria. Together these enhancements will continue to improve our seller and buyer experience.

Jorge Celaya: I'll turn it over to Jorge for more details on the quarter.

Jorge Celaya: Good morning. Our $380 million in GMV for this fiscal third quarter is a new record and a 14% increase over a previous record of $334 million set in the same quarter last year. Gumpfield continues to set records, including for quarterly GMV at $250 million, expanding market share and new services. Our retail segment remains a trusted long-term business partner with the scale, flexibility, innovation and reliability and with broad multi-channel solutions to consistently address the needs of our seller clients.

Jorge Celaya: The capital asset segment remains a global presence for corporate clients to monetize their fixed assets across economic and business cycles, while providing buyers opportunities to redeploy assets to grow with a competitive advantage. A machinio segment continues on its record pace, growing its established client base while expanding its services and its global markets. Specifically, our consolidated third quarter of fiscal year, 2024 financial results included. The GMV of $380.4 million up 14% from $334 million in the same quarter last year, revenue of $93.6 million of 16% from $80.8 million in the same quarter last year, while gap earnings per share of 19 cents included some acquisition related expenses and recording of a legal settlement resulting in the lower earnings per share compared to the same quarter last year.

Jorge Celaya: Non-gap adjusted earnings per share of 30 cents up to 2 cents or 7% from the same quarter last year and non-gap adjusted EBITDA of $14.7 million of $1.4 million or 10% from the same quarter last year. Our adjusted EBITDA for this fiscal third quarter was at 30% of the total of our segments direct profits. We ended the fiscal third quarter with $136.8 million in cash, cash equivalents and short term investments. We generated $22.2 million of cash from operations during the fiscal third quarter.

Jorge Celaya: We continue to have zero debt and 25 million dollars of available borrowing capacity under our credit facility. Specifically comparing segment results from this fiscal third quarter to the same quarter last year, the GovDeal segments GMV was up 17% revenue up 28% and direct profit up 26%. Each a new quarterly record as traditional product categories paired with a higher blended revenue take rate from expanded service offers. Our retail segment was up 9% on GMV and up 15% on revenue that set a new segment record, all down 3% on segment direct profit reflecting the higher proportion of purchase revenue in retail and the lower value product flows compared to last year.

Jorge Celaya: Revenue grew faster than GMV due to the higher purchase flows. Our tag segment was up 7% on GMV, down 4% on revenue and down 6% on segment direct profit as confinement sales with partners in our industrial vertical grew as did the heavy equipment category yet will partly offset by project delays in our energy vertical.

Jorge Celaya: Machinery revenue was up 15% and its segment direct profit was up 16% as we continue to increase recurring subscriptions and pricing for both equipment advertising listings and turnkey solutions for dealer management systems. Moving to our fiscal fourth quarter business outlook. We expect to continue double-digit consolidated GMV growth at the midpoint of our guidance range and solid overall results. As a reminder, as Gugdeals has come off its seasonally high fiscal third quarter, revenue during this next fiscal fourth quarter is still expected to grow as slightly faster year over year rate than GMV due to broader confinement service offers.

Jorge Celaya: We anticipate growth in our retail segment to be led predominantly by an expansion in purchase volumes resulting in overall retail revenue also growing faster than GMV and improved bottom line results for the segment. These volumes are mostly comprised of a mix of lower touch product value product flows and are expected to result in a lower retail segment direct profit as a percent of revenue. Our capital asset segments outlook for this fiscal fourth quarter is for steady year over year performance, yet sequential growth.

Jorge Celaya: Our machinio subscription based business is anticipated to continue to grow revenue by double digits year over year. Given the expected mix of segment volumes, which includes Gugdeals coming off its seasonally high quarter and a mix shift from the new retail programs, we are anticipating our consolidated revenue as a percent of GMV to be higher in the high 20 percentage range for this coming fiscal fourth quarter. And our segments direct profit as a percent of total revenue to be lower in the high 40 percentage range.

Jorge Celaya: Management guidance for the fourth quarter of fiscal year 2024 is as follows. We expect GMV to range from $330 million to $365 million. Gap net income is expected in the range of $5 million to $7 million with a corresponding gap diluted earnings per share ranging from 16 cents to 22 cents per share. Non-Gap adjusted diluted earnings per share is estimated in the range of 25 cents to 32 cents per share. We estimate non-Gap adjusted evaduct to range from $12 million to $15 million. The gap in non-Gap EPS guidance assumes that we have approximately 31.5 to 32 million fully diluted weighted average shares outstanding for the fourth quarter of fiscal year 2024.

Unknown Executive: Thank you and we will now take your questions. Thank you.

Gary Prestopino: Gary Presipino from Bearington research is on the line with a question. Your line is now open. Hey, the morning Bill and Jorge. Bill, you were talking about seeing some evidence of softening prices and gov deals. That's just a really a direct reflection of what's going on in the vehicle. Use vehicle market. Correct. We've seen some softening with flea assets, both vehicle and construction equipment. Okay. But at the same time, you know, from what I'm hearing about the industry, the supply is starting to kick up at a fairly steady pace.

Gary Prestopino: You know, are you seeing that as well in your markets? I mean, realizing you don't really can generally follow the wholesale auction market for vehicles that are used by consumers. But what can you say about some of the supply issues there that the constraints you were feeling? We have no headwinds related to supply. The government market has intent to buy the budget to buy and continues its sort of replenishment cycle. So that has been very steady for us. Okay.

Unknown Executive: And then second question is you talked about the RS CG segment. You launched a single item recovery tool. Could you maybe discuss that or what that tool is?

William Angrick: Sure. The term I use was single item receiving tool and what that allows. And essentially it's harnessing. The standardized available data into a receiving tool that allows us to quickly identify the right channel for each item received from the flow of return goods and the use of that tool as a couple of things one that helps us optimize the operational process so it automate something that had historically been more manual. So it's driving efficiencies to it's accelerating the listing of the item so faster time to cash and three giving us attributes that allows us to determine should the item go in a B2B channel versus a direct consumer channel. It's ultimately drives higher recovery so we're pleased with that enhancement.

William Angrick: Okay, and then just lastly in the CAG segment, do you feel that some of these delayed asset sales that you cited in your commentary will they be completed or done in Q4? And as well as with the 33 new mandates that you got in Q3, when does that start flowing into the GMB mix? Yeah, mandates will ripen over the next few quarters. I think some of these delays reflect the macro volatility we have where corporate America can sometimes stop and start different initiatives depending upon their internal forecast for demand.

William Angrick: Or what they want to do with mergers, consolidations, cost cutting exercises. So importantly, had nothing to do with us really has to do with these are downstream or call it upstream decisions that affect this position of assets. What we like is the fact that we're winning very high percentage of anything that we're pitching and we're getting recurring flow business. What we call corporate forward flow recurring flow business from no brand name fortune 500, 421,000 companies. So whenever the assets do go to market, it will be the marketplace that handles those transactions. So some percentage of them will fall into Q4, you know Q1 or Q2 of fiscal 25.

Unknown Executive: Okay, thank you very much. Thank you.

William Angrick: George Sutton from Craig, how is on the line with the question your line is now open? Bill, nice results and you characterized the current environment is challenged and I wanted to kind of think through how you're thinking about the concept of you just being a growth cyclical meaning your business that grows, but you do have cyclical components. And I'm trying to understand the positives and the negatives relative to the cyclicality. In other words, you you referred to pricing in some cases a challenge and we obviously had some deals push those may be macro related.

William Angrick: But on the alternative side, you would seem to be a wonderful place to be if we sit here today concerned about the future of the economy given the two-sided marketplace. Can you just discuss that in your thoughts?

William Angrick: Sure. Well, we're a huge engine for monetizing assets, so whether a Fortune 100 company or carbon agency wants to manage its balance sheet more sharply, we're a natural place to look to to help them husband resource this during slow growth environment. So, we see, you know, some tailwinds from slow and growth because if that asset can't be used productively and generate some sort of a return for the owner, it's going to be sold.

William Angrick: And we're the natural place to take it to market, so that's going to be positive. And I think when you look at the total DMV of the company, you know, CAG, which is probably the lumpiest, you know, only represents about 20% of the pie, so there's muted cyclicality relative to these large industrial assets that may move around from one quarter to the other. What we've seen is, you know, strong tailwinds as both, you know, government clients are trying to be one more efficient, you know, using digital solutions, you know, faster sales cycle, faster time to cash, less work, you know, free, freeing up physical space, you know, to sell these assets quickly.

William Angrick: I think to the buyer side of our marketplace is frugal, you know, they're looking to save money and we're a natural marketplace to go to buy something, you know, at less than even wholesale costs and save money and help build their business or, you know, use an asset, you know, in their operations. So that's been great. And then on the retail side, you know, we are the trusted provider. You know, we're where the market has migrated to get good execution around tracking, managing, and monetizing return goods.

William Angrick: This is a market that continues to grow. It's growing through any sort of recessionary trend. It's just the fact of, you know, this mixed shift from in person to online shopping. And so we expanded our capabilities.

William Angrick: There was a press release out on our Brownsburg, Indiana facility. It's a larger facility. It's responding to marketplace needs for, you know, B2B and direct consumer flows. So we have a resilient, scalable model for the retail supply chain to continue to be more efficient around, you know, managing and selling a returned merchandise. And we think that's a constant cyclical, honestly, it's a, you know, markets, you know, that continues to grow. Great.

William Angrick: And then just one other question in pointing to the strong results for the quarter, you specifically referred to service expansion. I just want to make sure I knew what you were referring to there. Sure. We've given clients different tools to sort of opt into what is most relevant for them. And I mentioned both self-directed solutions where Clients can use our solutions to identify and upload assets directly. They pay a lower commission for that, and many clients opt to do that.

William Angrick: We also provide fully managed offerings, and that's reflective of some of our facility expansions where clients have directed consumers who have the returns to return those to our facilities, so it removes those and leg of transportation back to a retailer's return center, so we've created tools and services and the space to take items back directly from consumers. We also have services in the government and fleet business where if a client is shorthanded, we can dispatch an individual to help them catalog assets, and the CR auction business we acquired had a history of doing that, and that's allowed us to provide semi-assisted services to access more fleet business, so those are the things that we've been talking about when we refer to services.

Unknown Executive: Very good, thank you very much.

Unknown Executive: We have no further questions at this time.

Unknown Executive: Thank you for your participation in today's conference.

This does conclude the program, you may now disconnect.

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